Regional travel key to Asian recovery

In this week’s first podcast, David and Catherine are joined by Dillip Rajakarier, Group CEO of Minor International and CEO of Minor Hotels. With exposure in almost 60 markets around the world, Minor has taken a country-by-country approach to tackling the crisis, always putting the safety and welfare of their teams and guests first. Looking at the crisis from the perspective of Minor’s home-base in Thailand, Dillip says regional travel will return first, but international arrivals will take much longer to come back. Even countries such as Sri Lanka, which he praises for the speed at which they got the virus under control, will struggle because the strict curfews have brought the country’s economy to its knees.

On the other hand, Dillip believes the crisis may force change upon certain destinations like the Maldives that desperately need recalibrating. Recent years have seen the country navigate towards a lower-cost market, which was not good for the country, and he hopes this may cause the Maldives to return to its roots as a high-end luxury destination.

TRANSCRIPT

START AUDIO

David Keen 0:09Hi, this is David Keen. At QUO, we’ve worked for the last 20 years with many of the world’s best known travel brands. During this unprecedented global crisis, our world of travel has changed, possibly irreversibly. This series will see us speak with many global leaders to understand how they see the future of travel.

David Keen 0:47

Hello and welcome to Dillip Rajakarier, the Group Chief Executive Officer of Minor International, and the CEO of the Minor Hotel Group. And a great friend of QUO and a longtime friend in inThailand. How are you, Dillip?

David Keen 1:15Dillip, the… it’s still, as we were saying before we started recording, relatively very early days in this situation. While, in many countries, we hope and we pray that the virus is flattening out or disappearing or at least dying down, there’s no guarantees that it’s not going to come back, and there’s no guarantees that it won’t pop up in different places. Economically, it’s having a devastating effect, and it’s only now beginning to be measured. How do you feel in our home in Thailand and throughout South East Asia, the economic impacts of the virus will be felt.

Dillip Rajakarier 1:57I think, for Asia and the regional countries, the economic impact is going to be severe. And we have to be ready to embrace this. Already, the World Bank and some of the other institutions have already said that. We are looking at a negative growth this year, and possibly next year as well. And hopefully with some turn around by 2022, starting in 2022. So I think we need to be ready for a really rocky 2020 and then 2021 with a slow recovery, where we will see some cost improvements by 2022. That’s where we think it will be. Because, I think, especially the Asian economies—that some of the key drivers are dependent on some of the international markets as well. And I think that’s what’s going to hurt the Asian economy.

Dillip Rajakarier 3:03And of course, it depends on what’s going to happen with the Western economy like countries like the US and Europe. Depending on how fast or how quickly they come out of this crisis will be a key indicator as to how the Asian economy will turn around. Having said that, I think, already, we’re seeing China, sort of starting to move, which is quite positive. And China, of course, plays a major role within the Asian economy as well. But again, in China, I think it’s early days for us to say anything. But again, China will also show a very slow recovery.

David Keen 3:51in the press this morning here in Bangkok, and in the regional press, there’s talk of both Vietnam and Thailand benefiting in some ways—particularly Vietnam—from the economic fallout from China. Are you saying that?

Dillip Rajakarier 4:09But I think it’s, it’s yet to be seen. Because, as of today, yes even though China has opened up, and people are starting to travel within China, you can see how quickly the whole wheel is starting to turn. And I think Thailand is their first point of entry for the Chinese. Because we’ve always seen China, the numbers, especially coming into Thailand is one of the highest, for obvious reasons. And then it trickles into the other places like Vietnam, Cambodia, Laos and other places as well.

Dillip Rajakarier 4:53So I think, yes, when things start to move around, which I think will be—maybe the earliest will be Q3—you know, we will see some of the Chinese actually coming back to Thailand, and also then going forward to Vietnam and Cambodia and other places like that.

Dillip Rajakarier 5:15Where we see the initial recovery is mainly in the regional markets, you know like Japan, China, Taiwan and places like that. We don’t see much recovery coming from, or much international guests coming into, Thailand first, for obvious reasons. And that’s where we are sort of making plans to make sure that we are ready when things start to turn around, we’re ready to actually get into these key markets and drive those markets for us.

Catherine Monthienvichienchai 5:49Dillip, in the past decade or longer, Thailand has suffered numerous crises. We’ve been through political crises, a tsunami, the floods. And always, the country had this amazing capacity to bounce back. How do you see the country bouncing back this time? I think it’s likely to be a lot longer and more and more severe in impact. but what’s your take on that?

Dillip Rajakarier 6:09I think the only difference this time is, in the past, yes we have seen SARS; we have seen bird flu; we have seen the swine flu; we have seen even Ebola, as well. But it’s pretty much—it hasn’t been at this extent, like, you know, today it’s a global pandemic. And the number of… and the casualty levels are quite high. We still don’t have a vaccine. And we still don’t have anything at the moment. So therefore, yes, in the past, even after SARS, Thailand did rebound pretty fast. You know, we did rebound within six months. In this case, I think the rebound will happen within the regional markets as I said before, but I think the international markets is going to take time.

David Keen 7:03Do you think the infrastructure—the border infrastructure, and the testing and the health sector and the health certificates and everything that’s required—are going to be able to be implemented in as effective a way as they need to be in order for tourism to come back?

Dillip Rajakarier 7:26Well, I think the main thing is we need to look at the tourism numbers, right? And when we look at, say for example in Thailand, they enjoy close to 35 million tourists coming into Thailand. Now, even when you look at some of the Western economies, you know, they’re even struggling to test [a] hundred thousand a day. You know, UK can only test, you know, 25,000-30,000 a day.

Dillip Rajakarier 7:54So therefore, this is going to take time. Because of the lack of the testing devices of the equipment we have. And therefore, that will take much much longer. I saw Emirates, which has come out with a great initiative, like, you know, and I don’t know how practical, it is that they’re saying that they will test their customers on the travelers before they get on the plane. It takes 10 or 15 minutes. I’m not sure where they’re going to get so much of the testing equipment or the test kits, as such. But I think that would be a game changer, and if the airlines can start to do that, because, and that will also give comfort to certain countries. Because I think even the borders are open, some of their countries will still have border control to make sure that there is control over the borders to ensure that no one is carrying the virus back into the country as well. So yes, I think, in my opinion, this is going to take a long time.

David Keen 9:07Do you think this is an opportunity—and again I’m talking locally in Thailand—for, once and for all, create a public-private partnership, or more influence garnered by private enterprise in managing of the airport, for example? Because if we don’t have this Emirates-like system, some sort of system where there’s some border control, and there’s a speedy check, you know, the likelihood of tourism in any kind of significant numbers coming back is pretty much reduced.

Dillip Rajakarier 9:48Absolutely, David. I think it’s key, and we have seen in different countries, in different economies, how a private-public partnership works. The PPP can be very, very successful. If it’s implemented in the right way, and if there’s collaboration between the private enterprise and also the public enterprise to coordinate and collaborate, as well. I think it could be a great success story because, from a private-enterprise perspective, people will look at it from a more commercial side to see how quickly we can get things done. And from a public perspective, I think, you know, they’ll be able to cut through some of the red tape and make sure things start to happen, and make it happen so that I think the combination of the two can, can actually be a good success.

Catherine Monthienvichienchai 10:47And Dillip, looking at your own network, your own brands and your own portfolio at Minor, how have you reacted to the crisis? What is your short-term response? What is your medium- to longer-term planning that you’re looking at?

Dillip Rajakarier 10:59So for us, because today we have exposure in about close to 60 countries globally, we have looked at it by country. There’s nothing—one-size-fits-all sort of concept. Each country, we are dealing on a one-to-one basis I’d say.

Dillip Rajakarier 11:21But I think the first thing we did was to make sure that all our team members are safe. And we have a duty of care towards our team members, and also the customers as well. So the first thing we did was we had to move it really fast. Say for example if I take Thailand as a case. We were the first to shut down our projects. And even though it was painful, we felt that it was an important step to protect our team members, and also to protect our guests, as well. And that’s what we did.

Dillip Rajakarier 12:01And there are—like you know we have yet made sure, like, you know, we’ve taken other initiatives in terms of looking after our team members. Because, you know, this is a very, very difficult period. And especially in Thailand, there’s not much support coming from the government, which is a little bit sad. And the recent announcements, like you know, they have made, is that you know that even the Social Security Office will only pay 60% of the salary, and only people who are earning below 15,000 baht. Now don’t forget these team members have not only lost their salary; they’ve also lost their service charge, which is—salary’s a smaller component compared to the service charge. Because with our hotel, the service charge makes about 60%, or sometimes 70% of their income. And that has gone.

Dillip Rajakarier 13:00So what we have done is, you know, even though we are in a force majeure, we have made sure like from our product team members to right to the top. Yes, everyone is taking the pain pill, but taking it in different levels, and making sure that we are supporting our team members during this critical period. Even though the Social Security is saying that they can, you know, these payments will be made for April, there’s no way payments will be made for April. So what we are doing is, we are now stepping in. We are giving them loans so that they will have money to at least get some food and basic rations and stuff like that. And they can survive the month of April.

Dillip Rajakarier 13:48So I think that’s what we have done here in Thailand, and with the others, we’ve taken pay cuts up to 50-55% to sustain the business and to make sure that the business will remain strong, and we will come back strong. In certain countries, like if you look at Europe, I think Spain has had some great initiatives. The government stepped in, and they are paying up to 60% of the salaries of the people who are staying at home. Because in Spain, all our hotels are closed. That’s a great initiative and they’re paying it for everyone. So what we’re doing is we’re then topping up the balance. They postpone mortgage payments; they postpone loan repayments; all these other things they’re done.

Dillip Rajakarier 14:39The UK also has done similar things. You know they’ve followed and they’re paying up to 80% with a maximum of 2,500 pounds per person. So I think some of the countries have taken some really good steps and, and we are doing it by country. So I’d say even Australia—like in Australia—announced that they pay $1,500 every two weeks for every single employee. So, we then top them up for the balance. But again, Australia, what we have done is, we’ve also found another business niche, where the people who are coming from outside have to be quarantined for 14 days. And we have offered our hotels to be the quarantine place where, you know—because of The Oaks model, they can stay in their apartments. We are providing them food. We’re getting deliveries to our hotels and all those, and they can be called in for 14 days, and then they move on to their families.

Dillip Rajakarier 15:41And we’ve done the same thing with some of the hospital workers—the nurses, the doctors as well—where we’ve reduced the risk of them going back to their own homes and infecting their own families. So we are providing accommodation for them, so they can stay at our hotel, and then go to work as well. So there’s a lot of initiatives, which we have embarked on, and we’re doing with—on the food side, we’re providing food for the health workers. Like say for example The Wolseley in London, our restaurants are cooking food and sending it to all the NHS workers. Because we have our staff, we have our kitchens, and that’s something we’re doing to support the NHS and the staff there.

Dillip Rajakarier 16:28So yeah, so I think each country is doing their own thing to actually support the team members, and also to support the society as well.

David Keen 16:37When tourism returns, or when travel returns, be it business or leisure, we’re talking as you may have heard about the difference between the analog and the digital age, and the barriers being the bridge between the analog and the digital age. But still in terms of the brands, and in terms of whether it’s Oaks in Australia or Anantara brand or the NY brand or whichever it is. When we reach the new normal, when travel begins to come back and supply will be enormous and demand will be small, the initiatives that you’re doing now creating opportunities—what else do you have to do with your brand in order to create that desire?

Dillip Rajakarier 17:23I think there’s a lot, David, which we need to do. We pretty much need to resize our strategies and rethink our strategies based on the new—who is going to be our customers day after tomorrow? And that’s going to change a lot. And I think, initially, we will see the millennials, initially traveling and getting a little bit more comfortable. Some corporate travel, but on MICE side it will be quite low. And also, the elderly will not be getting on the plane soon as things start to recover.

Dillip Rajakarier 18:00So from our perspective, we are looking at different things. We are also looking at high-tech, low-touch, which will be the new emphasis going forward. Like say for example on the food side today, we have this no-touch policy. So all our food outlets, we are doing really well on the delivery side, even though our restaurants are closed, but our policy is what we call ‘no-touch policy’, which means, you know, the food gets delivered; the driver doesn’t touch anything; the customer comes and gets the food. And it’s safe. They carry sanitizers and, and their uniform, and they’re quite safe.

Dillip Rajakarier 18:42We are looking at the shared working spaces will need to be reassessed again. We are looking at working from home. We’re looking at, you know, reducing office size in terms of hot desks and stuff. Because I think, you know, today with technology, there’s a lot you can do from anywhere. And you can really work from home as well.

Dillip Rajakarier 19:08From a guest perspective, I think this shows the social distancing will carry on for some time, until people get a little bit more comfortable. The hotels will need to be much more savvy and much more… taking much stronger steps in terms of health and safety of their guests. Sanitizing, even the transfers from the cars, the culinary procedures or the culinary experiences.

Dillip Rajakarier 19:41We believe that the wellness retreats and the preventative wellness, could be another new business segment now based on what’s happening. In terms of, you know, creating immune system and being the wellness as well. So I think there’s quite a bit of drivers which is going to come in, which is going to be the new norm, I would say. And I think the businesses have to really think about starting from—almost starting from zero.

Catherine Monthienvichienchai 20:15And Dillip, we’ve been talking to various people about the role of OTAs in the future. Some people feel that the hotels will fight back against the OTAs, and others saying that there’ll be such a big price war when things start to get back to normal, that the OTAs will remain dominant. What is your take on that?

Dillip Rajakarier 20:35I think I think what’s going to happen is, whether we like it or not, there is going to be a fallout. In the tourism sector, especially some of the larger companies will become stronger, and some of the smaller companies, including the owner-operator hotels, are going to fall by the wayside. And therefore, they will have problems with distribution. They will be forced to do almost a fire sale, which we are already seeing today, because they won’t be able to meet their obligations. They have already let go all their staff on the basis of no work/no pay. So they have to start to rebuild the infrastructure. They have to start to rebuild the team members. They have to do training and all those things. When the industry starts to turn again.

Dillip Rajakarier 21:29So, I think, and when it comes to the larger players, as you know, the larger players today. I think every single larger player is trying to […] from the OTAs into their own brands. And that will continue, and the survival of OTAs will be there whether we like it or not, because, of course, you know as hotel companies, we cannot spend the amount of marketing dollars which the OTAs spend. And the choice they offer as well. And I think they will both survive in the future.

David Keen 22:04And one last question, and then we must close because we’ve gone on too long. In your home in Sri Lanka and close to home in the Maldives—obviously right now tourism has been completely decimated, and the Modi’s has been singled out by the IMF as the single—one of the single-biggest problem economies in South Asia. How do you, how do you see the Maldives coming back. And finally, to talk a little bit about Sri Lanka and what you feel is the prognosis for Sri Lanka

Dillip Rajakarier 22:42I think when we compare Maldives and Sri Lanka. I have to take my hat off in terms of what Sri Lanka has done today. You know, they’ve really got it—they’ve got it really fast, even though it’s caused pain and discomfort for citizens. But they’ve really controlled for a country. It’s an island again—Sri Lanka is an island as you know. You know, for a country of that size to have only seven deaths is pretty much—it’s phenomenal. And what the government has done is amazing. They’ve only got 230-odd cases, and 60 have already recovered.

Dillip Rajakarier 23:25And the government has also zoned different places as well. And the red zone people are not allowed to move. They’re not—there’s a strong curfew. So I think Sri Lanka will rebound. And Sri Lanka is always, you know, it’s always been voted as one of the top destinations in the world. We saw how Sri Lanka rebounded after the bombs, which happened last year. And I think Sri Lanka will come back. The only issue with Sri Lanka—my fear is that the economy is going to take a bit of a beating. Because this whole thing about the curfew and everything has blown the economy to its knees. And the government will struggle unless otherwise there’s some IMF funding to help or support Sri Lanka.

Dillip Rajakarier 24:14But if I look at Maldives—Maldives is totally different. You know, you have different islands, and it’s very very difficult to control. And also we heard that there was a case they found again in Bali, as well. And, again, in terms of sophistication and testing, they are not as advanced as Sri Lanka. So I think there is going to be a bit of a challenge between the two countries. But I think Maldives—the only thing I would say is maybe the government could focus on what Maldives used to be in the past, which is a very high-end tourist destination, and offering the high-end tourists and I think maybe people who have private jets and all these can also take some of these islands on an exclusive basis, and be that they’re safe as well. And Maldives could go back into that high-end luxury tourist destination, instead of—they were navigating more towards the backpackers, and they were navigating towards the low-end. Which also was not good for Maldives. And hopefully, there could be a change of mind there.

David Keen 25:26Dillip Rajakarier, thank you so much for being a guest on The Future of Travel. Stay safe to you and to everybody at Minor, and we look forward to seeing you soon. Thanks, Dillip.

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